Why Free Virtualization Won't Necessarily Strike Down VMware

Not long ago, I was talking with a friend of mine who works at VMware, the Palo Alto, Calif.-based irtualization software giant. Many people, even very technology-savvy folks, don't realize how big and powerful VMware really is. This is a software company with a market capitalization of nearly $23 billion, and its market cap was larger than that not long ago. The company's CEO is Paul Maritz, who was a powerful executive at Microsoft for many years.

Lately, though, VMware's future has been widely questioned because virtualization features are showing up free in operating systems and there are numerous free and open source virtualization options. My friend at VMware, though, made clear that the company is far from dead.

In 2008, in a post called "Open Source and the Fall of VMware," I wrote about the converging threats to VMware's business:

"VMware is not a one-product company, but its huge market capitalization was largely built on efforts in one arena: virtualization. Unfortunately, that red hot technology is increasingly being encroached on by open source offerings, and it is always a precarious proposition for tech companies to depend on one product category as heavily as VMware has. Just ask the former employees of Netscape or Lotus about that."

In addition to the open source threats to VMware's virtualization offerings, software companies far and wide--including Microsoft--are building virtualization into their operating systems, where the hypervisor is essentially a free software utility. However, my friend at VMware pointed out to me that VMware itself offers virtualization software for free, and he pointed out that just getting a free hypervisor is hardly the whole equation. IT managers, for example, use VMware's dashboards and utilities to monitor virtualized software implementations throughout enterprises. On top of that, they also use VMware's management software to optimize virtualization in data centers, where optimization can save companies substantial amounts of money because they can save on costly servers, energy costs, and more.

In additon to these points, my friend noted that virtualization is just very, very complex--a tough computing problem to crack. According to him, not every player is necessarily really good at it. That's why this week's news that VMware is buying Gemstone isn't necessarily as random as some are making it out to be. SpringSource, a big player in open source and a key company for software developers--especially ones focused on Java--is now a division of VMware. Gemstone and its software framework will be part of VMware's effort to offer more to developers focused on building applications that take advantage of virtualized software implementations. It's an attempt to add value for those developers.

The more I consider the new directions that VMware is going in, the more I think it may have a brighter future than many people think. Paul Maritz knows how software and audiences for it work. VMware is focused on offering added-value software on top of hypervisors--ranging from dashboards to development tools. And there is certainly no stopping the virtualization train, where it is really making a difference in previously costly data centers. VMware remains a software story to watch.